Busan District Court Decision 2008Guhap144 (Law No. 208.20)

Cho High Court Decision 2007Da2821 ( October 17, 2007)

No claim for refund of value-added tax by an exporter of gold bullion shall be permitted in violation of good faith.

It is difficult to conclude that gold bullion transactions are not a supply of goods. However, it is reasonable to deem that the Plaintiff, an exporter, has been aware of the fact that there is a malicious business entity engaging in illegal transactions and that the Plaintiff’s deduction and refund of input tax amount would result in a decrease in other tax revenues. Accordingly, the claim for refund of value-added tax cannot be permitted contrary to

209Nu5428 Disposition to revoke the imposition of value-added tax.

XX

O Head of tax office

Busan District Court Decision 2008Guhap144 Decided August 20, 2009

May 4, 2011

June 8, 201

1. Revocation of a judgment of the first instance;

2. The plaintiff's claim is dismissed.

3. All costs of the lawsuit shall be borne by the Plaintiff.

1. Purport of claim

The Defendant’s disposition of imposition of value-added tax for the second period of February 5, 2007 against the Plaintiff on February 5, 2007 (1,684,207,700 won, value-added tax for the first period of January 2004 (3,166,316,990 won, and value-added tax for the second period of February 2004 (854,695,160 won) shall be revoked.

2. Purport of appeal

same as the entry.

1. Details of the disposition;

A. On October 25, 2003, the Plaintiff registered its business with the trade name referred to in XX 498-2 of the Busan XXdong 498-2, and closed its business on September 30, 2005 when engaging in gold bullion wholesale business (referring to gold whose net level is not less than 995/1,000 in the context of raw materials, such as gold bullion, gold bullion, and Alley, etc.).

B. From October 25, 2003 to December 31, 2004, the Plaintiff purchased gold bullion equivalent to KRW 57 billion 2,3120,000 (hereinafter “the gold bullion of this case”) in total from 6 companies, such as Alley○, Inc. (hereinafter “Alley○”), and received Chapter 97 of the purchase tax invoice (hereinafter “the purchase tax invoice of this case”), and specific details of the purchase are as listed below.

(The following table omitted):

C. The Plaintiff exported the gold bullion in this case to 57,495,310,612 in total from the export value of the instant gold bullion to △△△△△△△△△, a buyer of Hong Kong, △△△△△△△△, and △△△△△△△ (hereinafter referred to as the “Export”), and received refund of KRW 3,16,316,90 for the first half year of 2004 by deducting the amount based on the supply value on the purchase tax invoice of this case as the input tax amount when filing a return of value added tax for the pertinent taxable period. The calculation of the output tax amount is subject to zero tax, and the amount based on the supply value on the purchase tax invoice of this case as the input tax amount is subject to zero tax rate, and upon filing a return of early refund of value-added tax for the second year of 2003, the value-added tax for 16,316,90 won for the second year of 204, the value-added tax amount of 85,75,198

D. On December 19, 2006, the Defendant, upon conducting a tax investigation with the Plaintiff, deemed that the Plaintiff was unfairly paid value-added tax due to the disguised commercial transactions for the purpose of tax evasion, and filed an accusation against the Plaintiff for the suspicion of tax evasion, at the same time, on February 5, 2007, imposed an additional value-added tax of KRW 5,705,219,850 on the Plaintiff (hereinafter “instant disposition”).

[Reasons for Recognition] Facts without dispute, Gap evidence 1, 2, Eul evidence, Eul evidence 1, 2 (including above numbers), the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The parties' assertion

(1) Plaintiff

The plaintiff was actually supplied with the gold bullion in this case from the purchaser of this case and exported the gold bullion in this case to the exporter of this case, and the plaintiff conspiredd with the so-called "exploitan enterprise" in order to illegally refund value-added tax is merely the defendant's trend. The plaintiff did not intend to evade taxes jointly with other gold bullion companies and could not have known other companies' acts. Thus, the purchase tax invoice in this case was false tax invoice or the disposition in this case on the premise that the plaintiff knew or could have known it is unlawful.

(2) Defendant

Since the Plaintiff’s transaction regarding the gold bullion of this case is a processing transaction to unlawfully refund value-added tax by abusing the zero tax rate system, not only the purchase tax invoice of this case is false but also the Plaintiff’s filing an application for refund of value-added tax to the Defendant on the basis of the above purchase tax invoice violates the principle

(b) Related statutes;

It is as shown in the attached Table related statutes.

(c) Fact of recognition;

(1) A general form, etc. of an irregular gold bullion transaction for the purpose of tax evasion

(A) According to Article 11(1)1 of the Value-Added Tax Act, the zero-rate tax rate is applied to the supply of exported goods, and Article 106-3 of the former Restriction of Special Taxation Act (amended by Act No. 6762 of Dec. 11, 2002 and enforced from July 1, 2003) and Enforcement Decree of the same Act (Presidential Decree No. 1781, Dec. 30, 2002)

According to Article 106-3 of the Act as amended by Act No. 17829 and enforced from July 1, 2003), the value-added tax shall be exempted on gold bullion imported by the gold craftsmen and the gold craftsmen, etc. upon receiving a tax-free import recommendation from the tax-free gold bullion importer, for gold bullion wholesalers and the gold craftsmen who have received a tax-free import recommendation from the tax-free gold bullion importer.

(B) Such abuse of the value-added tax zero or tax exemption system, thereby importing the prohibited amount, and distributing it as tax exemption through various stages of wholesalers. The so-called so-called so-called so-called "large Carbon Business" (the gold bullion purchased through value-added tax exemption is converted to taxation, and the sales tax invoice is issued and issued while selling at a price lower than the purchase price, so that a trader would be allowed to deduct the input tax amount from the input tax amount. The exporter himself/herself, without paying the value-added tax, sells it again through various stages of wholesalers, and then exports it to distribute it to taxation, and the exporter evades the discounted value-added tax, and the so-called "large Carbon Business" that the exporter is entitled to receive the unpaid value-added tax from 202 to the precious metal business located in Jongno-gu Seoul Metropolitan Government, especially among the precious metal business located in Jongno-gu.

(C) Specific form of "explosion business"

1) In appearance, gold bullion is distributed through the stages of “foreign enterprises ? class enterprises ? duty-free wholesale companies ? Tax-free wholesale companies ? Tax-free wholesale companies ? Tax-free wholesale companies ? Export companies ? Foreign companies ? The transaction amount is paid in sequence from the export company to the import company . However, in particular, taxation-related wholesale companies are only issuing tax invoices according to specific persons or specific companies’ instructions, and they do not carry out actual transactions or transportation.

2) After purchasing gold bullion as a tax-free gold and selling it as a tax-free gold, the company evades the value-added tax by withdrawing, concealing, and closing its profits within a short period. The company sells gold bullion at a price lower than the purchase price (However, the proceeds from supply added to the value-added tax are higher than the purchase price), but the company obtains profits equivalent to the difference between the consideration for supply and the purchase price by not paying the value-added tax collected at a price lower than the purchase price.

3) Meanwhile, the transaction quota of the value-added tax imposed by the trade-related company is successively transferred by each of the companies in the immediately preceding phase through the tax invoice received from the immediately preceding phase company to deduct the input tax amount. In conclusion, the exporter of the country exports gold bullion and then is to be refunded by the State in accordance with the application of the zero-rate tax rate. Of the amount refunded by the State, the substantial portion of the value-added tax that the company has not paid by the country is the ultimate source of the profits accrued from the trade-related business. The profit is distributed to the domestic companies involved in the trade-related business in the trade-related business in the form of the so-called white dust, which is distributed in the form of magin or paid separately by the specified ratio of the profits of the company involved in the trade-related business, and the difference between the import price and the export price (the export price is lower than the import price if based on the domestic companies) to the foreign importing companies involved in the trade-related business.

4) In order to maximize profits, most uniform poles (referring to those who prepare for the first gold bullion import fund from the outside of the bomb business network) shall operate simultaneously with the exporter and the importer, and shall place them in direct transactions with the bombing company, and shall de facto determine the volume of the transaction, unit price, and margin in each transaction stage. The series of transactions from the importer to the exporter shall be conducted within a very short time, and the actual amount of gold bullion is being transported immediately to the exporter by hanging the transaction stage. There are most cases where the actual gold bullion is transported immediately from the importer to the exporter.

5) If a trade structure of gold bullion business as above is attempted, the following basic flows are as follows:

(2) The Plaintiff’s circumstances leading to the instant transaction, etc.

(A) From December 4, 2001, the Plaintiff is a person operating a Chinese restaurant in the name of "sisung" in the name of "simili" in the PuGu of Busan to 498-2. In the 1990s, while selling gold in the 1990s while selling gold to the gold banks located in the city of Busan, the Plaintiff started the gold bullion business from October 2003 through the Gama, after hearing information about the gold bullion export from the Gama, which he accumulated for friendship.

(B) On December 23, 1996, ParkA was sentenced to imprisonment with prison labor for five years and a fine of 11.9 billion won on December 15, 2002 by the Supreme Court due to the maximum violation of the Punishment of Tax Evaders Act in relation to the smuggling. After release, ParkA carried out gold bullion business, including the instant gold bullion transaction (see, e.g., Supreme Court Decisions 2009Nu72, May 18, 201; 201Nu921, May 27, 2011, etc.) with Cho-B, etc., who operated the said gold bullion business (see, e.g., Supreme Court Decisions 2009Nu72, May 18, 2011; 201Nu921, May 27, 2011).

(3) The Purchase Transaction Agency of the instant case

(A) The instant purchase transaction office is six companies, such as Add ○○,CC, Ltd., DDDDD, EE comprehensive commercial company, FF company, and GGEd, and it purchased the instant gold bullion through a typical brupt enterprise, such as HH global, and a conduit company.

(B) The Plaintiff’s major sales business entity, the representative director, is the company run by Ga or Gab. The representative director in his name is the company run by Ga or GaB. The representative director in his name is the company run by Ga or GaB, and the Dolley is the company run by Do or GaB. The representative director in his name is Doe or Doef.

(C) On June 13, 2007, the Seoul High Court sentenced 9 years of imprisonment and fine 232 billion won (Seoul High Court Decision 2007No321 delivered on June 13, 2007) to the effect that “the above judgment became final and conclusive as the appeal of the Seoul High Court was dismissed, and the final judgment became final and conclusive as the final judgment was dismissed as the final appeal of the High Court was dismissed. The High Court and the HF and the HAA were mutually mutually different.

(4) The sales agency of this case

The Plaintiff exported all of the instant gold bullion to Hong Kong and △△com, and the actual manager of the said two companies is MNN.

Before around 1995, MusN had been in collusion with Park Don and operated △△ △ Domind and △ △ Domind at the same place.

The Plaintiff appears to have been using the beer NN prior to the transaction of the gold bullion (see Evidence A29).

(5) Specific details of the instant gold bullion transaction

(A) The instant gold bullion transaction was conducted in the form of being exported to Hong Kong on the date of import or on the date of import declaration by Hong Kong, via a wholesaler at levels 2, 3, and then, via a wholesaler at levels 2, 3, the Plaintiff, who is the exporter, finally, was exported to Hong Kong on or after the date of import.

(B) The gold bullion transaction of this case was conducted in the form of an export agency contract concluded with Adddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddd

In addition, the gold bullion transaction of this case was conducted in the Jongno-gu Seoul Metropolitan Government where the place of business of the plaintiff's operation is not in XX 498-2, but in Jongno-gu, Seoul.

(C) The Plaintiff’s export price was most lower than the international market price on the date of exportation as well as the domestic market price on the date of exportation.

(D) Meanwhile, gold bullion importers pay customs duties equivalent to 3% of the price of gold bullion at the time of the import of gold bullion, which is included in the transaction price of gold bullion and transferred to the purchaser, and gold bullion exporters shall be entitled to refund 3% of customs duties paid to the purchaser. To do so, they shall be issued from the purchaser transaction office a divisional certificate prescribed in the "Act on Special Cases concerning the Refund of Customs Duties, etc. Levied on Raw Materials for Export". However, in the gold bullion transaction of this case, trade parties, including the Plaintiff, including the Plaintiff did not receive at all necessary divisional certificates for the refund of customs duties, and the Plaintiff did not receive customs duties at the time of the first import while exporting the gold bullion. The amount exceeds 1.7 billion won.

[Based on the recognition] Gap evidence 7, 14 through 22, 25 through 27, 30, 35 through 38, 41, 46, 47, 20 through 6, 9 or 13, 29 or 29, 36 through 42, 48, and 51 (including all relevant numbers) respectively, and the purport of the whole pleadings

D. Determination

(1) Determination as to whether a tax invoice constitutes a false tax invoice

(A) Article 1(1)1 of the Value-Added Tax Act provides that "the supply of goods as taxable subject to value-added tax" and Article 6(1) provides that "the delivery or transfer of goods shall be a delivery or transfer of goods on all contractual or legal grounds." In light of the characteristics of value-added tax as multi-stage transaction tax, "delivery or transfer" under Article 6(1) of the Value-Added Tax Act includes all acts of causing the transfer of rights to use and consume goods, regardless of the existence of profits actually acquired (see, e.g., Supreme Court Decisions 85Nu286, Sept. 24, 1985; 9Du9247, Mar. 13, 2001; 9Du9247, etc.). In this case, the issue of whether a specific transaction constitutes the supply of goods as provided for in the Value-Added Tax Act shall be determined based on the purpose and circumstance of each transaction party, the ownership of profits, and the denial of the payment relationship between the two parties.

(B) Based on the above legal principles, the instant gold bullion was traded in a short period in a series of transactions through various stages of companies from which it was imported and exported. The Plaintiff’s assertion on this part is reasonable, and the Defendant’s assertion is without merit, on the following grounds: (a) there is so-called wide-scale coal companies that prepare and deliver a tax invoice and does not pay the amount equivalent to the value-added tax while purchasing gold bullion subject to value-added tax at the intermediate stage; (b) the export price of the instant gold bullion is lower than the import price; and (c) the mere fact that the transaction parties did not prepare a letter of promise to sell the gold bullion while trading the gold bullion, the gold bullion is actually distributed from the importer to the exporter; and (d) it appears that the price was paid. Therefore, it is difficult to conclude that the instant gold bullion transaction does not constitute a supply of goods subject to value-added tax; and (e) there is no other evidence to conclude otherwise.

(2) Judgment on the assertion of violation of good faith

(A) Article 15 of the Framework Act on National Taxes provides that “A taxpayer shall drive away in good faith in performing his/her duties. The same shall apply to a tax official’s performance of his/her duties,” thereby declaring that the principle of trust and good faith should also be a basic guidance ideology in the field of tax law. The principle of trust and good faith, which enables the concrete feasibility of the operation of the law through the function of embodying or supplementing the existing law and supplementing it, and supplementing the criticism of the law, plays a role in revising the theory of no taxation without law in the field of tax law, and thus, its scope of application is somewhat limited compared to the area of civil law. However, if there are special circumstances to deem that a tax official’s application of the provisions of tax law would result in an unreasonable consequence that would result in not being able to understand in light of the universal justice and ethics, and rather go against the sound legal order, the application of the provisions may be restricted or excluded exceptionally by the principle of good faith (Article 13(1) main text of the Framework Act on National Taxes).

Article 15 of the Value-Added Tax Act provides that an entrepreneur shall collect the value-added tax on the value of supply when supplying goods and services from the person who receives the supply thereof. Article 17(1) of the Value-Added Tax Act provides that the value-added tax to be paid by the entrepreneur shall be the amount obtained by deducting the input tax amount from the output tax amount, and that the input tax amount exceeding the output tax amount shall be refundable. This is based on the fact that the entrepreneur who receives the supply at each transaction stage prior to reaching the final consumer collects the sales tax amount from the entrepreneur who receives the supply and pays the tax amount to the State, and the entrepreneur who collects the tax amount shall, through the process of deducting and refunding the input tax amount from the State, transfer the burden of the tax amount to the final consumer in turn, and ultimately imposes it on the final consumer (see, e.g., Supreme Court Decision 9Da3984, Nov. 12, 199). This structure makes it impossible to maintain the system of value-added tax without paying the corresponding input tax amount to the State.

Therefore, in a series of continuous transactions, where a malicious entrepreneur has attempted to evade value-added tax from the beginning to the end, and does not pay the value-added tax collected by him by attempting to make an abnormal transaction that only causes losses if he/she does not evade value-added tax (hereinafter referred to as "illegal transaction"), as in the next transaction stage, if an exporter is entitled to deduct or refund the input tax without the burden of the output tax amount due to applying the zero-rate tax rate as in the next transaction stage, as in the next transaction stage, the country has no choice but to make a refund by using other tax classes. This result exceeds the passive gap of tax revenues and constitutes an active outflow of the national treasury, and thus, the burden exceeds the damage of the self-employed body and is transferred to the general public, thereby causing serious harm to the overall tax system.

Of course, even if there are the above reasons, if an exporter is in a situation where the existence of an illegal transaction is unknown at all, he/she may not, in principle, deny that the exporter can deduct or refund the input tax amount as prescribed by the Value-Added Tax Act. However, if the exporter had been aware that there was an illegal transaction at that pre-stage stage, and he/she had engaged in a transaction with an opportunity to promote his/her own interest without vagasing it, and his/her transaction profit is attributable to the preceding illegal transaction, and his/her participation in the transaction was ultimately a critical factor that makes it possible to make an illegal transaction ultimately by taking advantage of the deduction and refund system of the input tax amount, which is a premise, it is an act of pursuing unjust profits by abusing the input tax amount deduction and refund system, and thus, it cannot be said that the exporter’s deduction and refund of the input tax amount with other tax revenue from the illegal transaction to the national treasury as well as to prevent serious harm to the general tax system as seen above.

Therefore, seeking the deduction and refund of the input tax amount in such a case may not be easily paid in light of the universal sense of justice and ethics. This is against the principle of trust and good faith as stipulated in Article 15 of the Framework Act on National Taxes, and thus, it shall not be permitted. Such a legal doctrine is reasonable to deem that the same applies to a case where an exporter was unaware of such an illegal transaction due to a serious negligence in light of the perspective of fairness, the gravity of the outcome, and the universal sense of justice where the exporter was unaware of the existence of such an illegal transaction due to the gross negligence, i.e., the relationship with a malicious business operator, if the exporter was fully aware of the fact that he was fully aware of the fact, and even if he did not know of the fact, the exporter was remarkably aware of the fact that he did not have been aware of the fact that he was actually aware of the fact,

In addition, in such cases, since an exporter who is in a mutual relationship with a malicious business entity is entitled to deduct and refund the input tax amount from the State, and thus, the exporter denies such deduction and refund of the input tax amount, the exporter cannot be held liable for the evasion of value-added tax without reasonable grounds (see Supreme Court en banc Decision 2009Du13474, Jan. 20, 201).

(B) Based on the above legal principles, the Plaintiff’s return to the instant gold bullion was examined, and can be seen by the overall purport of the pleading, i.e., the following circumstances, i., the Plaintiff’s return to the instant gold bullion transaction with the aid of Park Don or Park Don after being released from the instant gold bullion case, and (ii) most of the purchasing places of the instant gold bullion transaction appear to be related to Park Don or its branch, and (iii) the period of the instant gold bullion transaction remains 1 year and 2 months, while the transaction remains 5.7 billion won, the Plaintiff did not receive customs duties exceeding 1.7 billion won while the Plaintiff traded the instant gold bullion, and (d) the Plaintiff’s claim for refund of the gold bullion transaction was made in violation of the principle of good faith by taking account of the Plaintiff’s general form of the transaction for tax evasion, the relationship with Park Gan, Man National Basic Act, etc., and the Plaintiff’s claim for refund of the gold bullion transaction for the purpose of tax evasion transaction.

3. Conclusion

Therefore, the plaintiff's claim of this case is dismissed as it is without merit, and the judgment of the court of first instance is unfair with different conclusions, so it is decided to accept the defendant's appeal and revoke it as per Disposition.